Are Services Taxable in California: All You Need to Know
Entities (including consumers) in California are taxed on their purchases of various physical products, such as cleaning supplies, clothing, and so on.3 min read
2. Filing Sales Taxes
3. Monthly Due Dates
4. Quarterly Due Dates
5. Yearly Due Dates
Are services taxable in California? No, they're not. Entities (including consumers) in California are taxed on their purchases or consumption of various physical products, such as cleaning supplies, clothing, school supplies, and so on. However, they don't pay taxes for using the services of a lawyer, a dentist, or a plumber.
If you do freelance writing or plumbing in California, you're lucky because services aren't taxable in California generally. Plus you won't have to care about paying sales taxes. For the record, if the kind of service you render has to do with manufacturing products, you may not escape paying sales taxes on the products you manufacture.
Nexus and Taxes
Businesses with physical venues in California have nexus. Consequently, they're required by law to register in order to collect sales taxes, file sales tax returns, and pay sales taxes to California State. If a retailer sells on Amazon and leverages Amazon's Fulfillment by Amazon (FBA) program, they'll be said to have a physical presence in California if some of their goods are stored in an Amazon FBA warehouse in California.
Filing Sales Taxes
When it's time to file your sales tax in California, the following are three things you must do:
- Compute how much you owe as sales tax.
- File a sales tax return.
- Pay the tax.
You can file online or through traditional mail. You can take advantage of the free online filing alternative of BOE, or you can opt for a third-party means of filing that's authorized to get returns and payment information, after passing the BOE's test of acceptance.
If you choose to file online, you can pay via the Electronic Funds Transfer program (EFT), ACH Credit, ACH Debit, your own bank, or pay by some other means. The Electronic Funds Transfer program is compulsory for entities that have a California Seller's Permit and make an average of $10,000 and above monthly payments or are holders of a Special Taxes and Fees account who average monthly tax payments of $20,000 and above. Others can choose this option voluntarily. There's also a prepayment sales tax rate for products, such as diesel, aviation fuel, and motor vehicle fuel.
Monthly Due Dates
Monthly due dates are due every last day of the month next to the reporting period month.
- January/February due date: Feb. 28 (Feb. 29 in a leap year)
- February/March due date: March 31
- March/April due date: April 30
- April/May due date: May 31
- May/June due date: June 30
- June/July due date: July 31
- July/August due date: Aug. 31
- August/September due date: Sept. 30
- September/October due date: Oct. 31
- October/November due date: Nov. 30
- November/December due date: Dec. 31
- December/January due date: Jan. 31
Quarterly Due Dates
Quarterly due dates are due April 30, July 31, Oct. 31, and Jan. 31. In other words, the due date for a quarter is the last day of the first month of the next quarter. The 24th of the earlier two months is when prepayment returns are due.
- January to March due date (Q1): April 30
- April to June due date (Q2): July 31
- July to September due date (Q3): Oct. 31
- October to December due date (Q4): Jan. 31
Yearly Due Dates
Sales Tax Accounts yearly due date is Jan. 31 (of the next year) for the previous year. Qualified Purchasers and Consumer Use Tax Accounts yearly due date is April 15. The 24th of the first two months of each quarter is the due date for filing prepayment accounts.
The period due from January to December is Jan 31. Interests and penalties will start accruing after the day a sales tax return is due. Examples of such interests and penalties include the following:
- 10 percent of the total tax due if an entity fails to file their tax return on its due date and 10 percent for late payment. This is not allowed to be more than a total of 10 percent interest depending on the interest rate indicated at the bottom of the return for all months or partial months within which the tax stays unsettled.
- If taxes stay unsettled above 90 days after their due date, a Collection Cost Recovery Fee (CRF) will have to be paid, except the defaulting entity enrolls in a payment plan and adheres to its rules.
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